If you have been looking for ways to borrow money, you may have run into the term “installment loans.” Learning more about installment loans, including what they can do for your credit rating, can have huge benefits to all types of borrowers, including those with good, poor, or even bad credit.
What are Installment Loans?
Any loan that is repaid over time using set, scheduled payments is considered an installment loan. In most cases, the repayment schedule requires borrowers to repay about the same amount each month, though weekly and biweekly arrangements are not uncommon. The term of the loan can range from a few months to upwards of 30 years depending on the type of loan in question. Examples of these types of loans include mortgages and lines of credit. These loans were first used by Singer, the sewing machine company, as a way to help its customers finance their purchases and have become an ideal way to borrow large sums of cash.
Installment Loan vs. Payday Loan vs Title Loan
Installment loans are an alternative to payday loans when it comes to getting the money you need. Payday loans function in a fundamentally different way, which means they may not be ideal for all situations. For example, payday loans are typically restricted to the amount you earn per paycheck. If you are looking for a loan that exceeds this amount, you need to turn to another source. Payday loans usually have to be repaid at once as well, which may not work for your lifestyle or your needs.
Title loans are another option available to borrowers but may not be ideal in all circumstances. For starters, borrowers must own the title to something, like a car or house, before they are eligible for this type of loan. Those with pre-existing mortgages, or who rent or lease, cannot benefit from these types of loans.
How They Can Help Build Credit
Having a predictable amount of money leave your account every month (or every week, depending on your repayment terms) makes budgeting much easier. It also simplifies the repayment process since you don’t have to wonder or worry if you are making a payment in the correct amount. Since you know the date in advance, you can even be sure that there is enough money in your account, reducing the risk of NSF fees and bounced checks
When you make your repayments on time, on a consistent basis, this information is reported by the lender to the credit bureau, positively impacting your credit rating. In addition, getting a loan like this can help you diversify your credit. For example, if you only have only had credit cards in the past, an installment loan lets the credit bureau know that you can be responsible with multiple types of credit, resulting in a bit of a boost to your score.
Where to Find the Best Loans?
You can get an installment loan through any reputable lender. For the best rates, however, it is advisable to go through an agency like Bonsai Finance. We work with you to find the best lenders out there, ensuring that you are matched with one with a principle amount and repayment terms you find agreeable and can easily live with. One benefit of using our services is that you can fill out your application and go through the entire process online, without ever needing to leave the house. This means that you can get the loan you need, at the terms you want, all while applying and dealing with the process when convenient for you.